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Douglas: How to plan for the post-baby money crunch

When Alison Norman was pregnant, she was a woman on a mission to accumulate enough employment hours to qualify for maternity leave.

“I was working five jobs in the hope that I would be able to take some time off after my baby was born,” she recalls. “I thought it would be nice to have one job (motherhood)], not five!”

Norman had a two-pronged strategy: qualifying for maternity benefits and trimming her budget. “It’s our year to be lean,” she explains. “No new clothes for us, no meals out or travel, and lots of hand-me-downs.”

Kira Vermond, a Toronto mother of two, took a similar approach to making ends meet for her most recent maternity leave. “I really wanted six months off with my second baby after taking just six weeks off with my first,” the self-employed writer and author of the forthcoming children’s book The Secret Life of Money: A Kid’s Guide to Cash recalls.

Vermond calculated she would need $2,000 per month to cover the necessities while she was on maternity leave. It took her two-and-a-half years to accumulate that $12,000 nest egg. “It was a nice feeling not having to go back to work right away or to stress about money.”

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Of course, sometimes the financial plan doesn’t play out as you had hoped.

“Having twins would be the most awesome blessing in the world if you had no financial worries,” Donna Pagnotta of Port Moody, B.C. insists. The mother of four-month-old twins and a five-year-old son is using every dollar-stretching trick in the book — using coupons, shopping second-hand online and emailing baby products companies to find out if they have any special offers for parents of multiples — to maximize her family’s spending power while she’s on maternity leave.

Katrina Carefoot also knows what it’s like to be hit with a financial curveball.

When her second baby was 7 months old, her first was diagnosed with autism. A permanently reduced income (Carefoot now works part-time) combined with massive therapy bills for 5-year-old Max ($65,000 last year) has meant that the family has been losing ground. “We now owe more on our mortgage than we did when we bought our house.”

It doesn’t take much to derail a family financially — not in an era of mostly stagnant or declining wages, record-breaking student-debt levels and the need for two full-time wage earners to pay the bills. This doesn’t allow much room for families to set aside that much-lauded three- to six-month cushion for emergencies.

Adding to the financial woes, a significant number of Canadian women — up to one-third — aren’t even eligible for maternity benefits, often because they are hired on contract rather than as employees. “You have to be able to produce a record of employment to demonstrate that all of those hours of employment were EI-insurable,” explains Armine Yalnizyan, senior economist with the Canadian Centre for Policy Alternatives. “Otherwise they don’t count.”

And even if a maternity leave is paid, it is at the rate of 55 per cent of a maximum of $39,000 per year (unless the employer offers a top-up in wages), something that can mean a significant loss of wages if the mother was the higher income earner in a family. That was the case for Ottawa-area mother, Annie Urban, author of the blog PhDinParenting.com, who maxed out her credit cards and her line of credit and returned to work just six weeks after the birth of her first baby. After her second baby was born, she was able to stay home for six months (the recommended period of exclusive breastfeeding), thanks to the considerably more generous and much more flexible maternity benefits program in Quebec. “By opting for accelerated benefits (to receive a year’s worth of money in six months) I received $1,000 every two weeks during that time, as opposed to $425 every two weeks under the federal plan.”

So what can you do to sidestep the financial pitfalls of maternity leave?

•Know what you’re spending: “Before you have the baby, you have to really do your homework,” says Cobourg, Ont., financial planner Marcy Berg of Mortgages4Women.ca. “You need to know how much money a month you need to live on.”

•Understand the benefits: It’s important to know what you are entitled to from the government and your employer, says Nora Spinks, executive director of the Vanier Institute of the Family. “Find out what government benefits are available and what that means to you on a take-home basis.” Learn what your employer contributes, too, and set up your own system for supplementing your income while you’re off work, says Spinks.

•Deal with debt head-on: “If debt is incurred while you are on maternity leave, have a conscious plan to pay it off,” Spinks suggests. “Don’t ramp back up to your old lifestyle when you returned to work until you’ve paid off that debt.”

•Advocate for creative policy solutions: In Newfoundland and Labrador, unions and women’s groups successfully lobbied the provincial government to introduce new parental benefits in 2008. A maximum combined benefit of $22,200 is paid during the first year after birth or adoption whether or not the parents are eligible for EI. “Unfortunately, young people raising babies are the most time-stressed and money-stressed people in the country,” says Yalnizyan. “It is incumbent upon others who have more time and more money to advocate on their behalf.”

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